Although year-over-year total pipeline counts are flat, the internal pipeline metrics that drive future openings have been trending upward. For six quarters new project announcements into the pipeline have exceeded the bottom established in the second quarter of 2011. For construction starts, the rolling four-quarter total has been trending upward for the past eight quarters.
Lodging Econometrics expects 500 projects (55,088 rooms) to open in 2013 for a 1.1 percent increase in the nation’s hotel supply. In 2014, new openings are forecasted to be 591 projects (66,102 rooms), a 1.3 percent supply increase. Rooms under construction have increased for six consecutive quarters, and are presently up 65 percent from the bottom set in the second quarter of 2011. But, at 630 projects (80,740 rooms), project totals are still a long way from previous cycle peaks.
The ranks of select-service and extended-stay hotels will swell over the next two years thanks to the short development timelines of these projects. Mostly less than 200 rooms, they usually enter the pipeline in the “starts in the next 12 months” stage, bypassing early planning altogether, and then quickly move to under construction.
Unlike larger upscale projects, zoning is less complex, financing is more readily available, projects are generally more prototypical, and construction timelines are shorter. From project inception until opening, smaller projects move rapidly, sometimes in as few as 18 months.
Conversely, there is little development activity for larger luxury, upper upscale, and casino chain scales, whose projects usually enter into the development pipeline in early planning. At year-end, luxury, upper upscale, and casino projects totaled just 7 percent of all projects in the pipeline, while upscale and upper midscale accounted for a whopping 76 percent.
Consequently, the pipeline mix, with big increases for smaller projects under construction and a decline in larger early planning projects, explains why future new openings can accelerate forward while total pipeline counts remain relatively flat.
Patrick “JP” Ford is a senior vice president of Lodging Econometrics in Portsmouth, N.H.